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Property prices edged downwards in China in January

Of the 70 major cities monitored by the government, 48 saw prices fall month on month, the data from the National Bureau of Statistics show. This is slightly fewer than the 52 cities which saw prices drop in December. Twenty two other cities were seen as stable, compared with 16 in December.

It means that year on year, 15 cities saw a price fall in January, compared to nine in December.

Wenzhou, a highly speculative market that was recently hit by a private financing crisis, recorded the largest monthly drop among all cities at 0.6%. Beijing and Shanghai both saw decreases of 0.1% month on month.

‘With the government's tightening measures set to continue, a deepened price correction is expected in the first half year,’ said Carlby Xie, head of research at the real estate consultancy Colliers International in Beijing.

‘However, home prices may gradually stabilize in the second half after falling back to a reasonable level,’ Xie added.

Since the start of 2011, the government had introduced many measures to cool down the runaway real estate market, such as pushing up minimum down payments, limiting the number of homes a family could purchase in some cities and introducing property taxes in Shanghai and Chongqing.

Property analysts EC Harris said in a research note that the slowdown was likely to continue, while warning of the risks for the wider economy.

‘China's tightening policies have been effective at reducing fears of a property bubble. But the measures could lead to a 'cascading' effect that causes the economy to slow down too much,’ the note said.

Most economists have lowered their forecast for China's growth this year, citing the correction in the country's property market as one of the biggest factors.

However, the central government still seems confident it can maintain the growth while deflating the real estate bubble. Last week, it pressured the eastern city of Wuhu to suspend a plan to relax restrictions. Vice Premier Li Keqiang said China will expand its real estate tax trial gradually.

‘We feel the central government wants to strengthen market expectations for long term property tightening stance,’ Wu Tao, chief executive of Wins Investment, the fund arm of Chinese developer Gemdale, told Reuters.